eMailbag Monday: Another Four Picks, Inktomi, ONSALE

Before we open up the emailbag for Monday we couldn’t wait to share this
with those of you who may have missed it: Broadcast.com (NASDAQ:BCST)
debuted on July 17 as the all-time best ever IPO, up 279% from its $18 initial price per share. That was a bump from its target of $13. Click
here now and get our analysis
of Broadcast.com’s chances in this white-hot market.


And now let’s take a few reader emails:


“I knew that 24/7 Media which provides Internet advertising and
direct marketing services, and uBID which operates an Internet-based
auction for excess merchandise will go public soon (already filed an initial registration statement). To what extent will 24/7 Media benefit from
the Internet boom? Can uBID be the next Egghead? Any opinions about the
potential growth for these companies.


By the way, you are always
following the 10 picks of 1998 and you are not giving yourself credit for
the 4 picks of Thursday, May 21 (click
here to see
the four)
: Egghead (NASDAQ:EGGS), E*TRADE (NASDAQ:EGRP), Mecklermedia
(NASDAQ:MECK) and Amazon (NASDAQ:AMZN), up an average of 85.35% in just two
months. Remarkable results.”


Reply: Thanks for bringing up the four picks we made May 21. Through
July 17 a $1,000 of shares in each gained an average of 88% since May 21.
We think Egghead may have hit a ceiling for now, though.


Regarding 24/7 and uBID, the auction space appears to be getting crowded with eBay (just filed to go public), ONSALE (NASDAQ:ONSL), and Egghead’s SurplusAuction. Wall Street’s attention span wavers after about three or four similar stocks appear.


24/7 could find a slot behind DoubleClick (NASDAQ:DCLK). Look for
our special IPO report tomorrow in Internet Stock Report.

Ink 2 You


“Give me your take on Inktomi and its Internet Cache product
Traffic Server. I have been doing some reading and a few analysts believe
that this market will approach $4 billion by 2002. Reports also say that
by 2001 large ISPs will spend $1 to $2 Million on caching solutions as
opposed to constantly buying faster lines and routers to solve network
congestion. If INKT gained 30% market share, this would equate to $1.2
billion in sales at 10% and this could equal $120 million in net operating
profit spread over 20 million shares, gives you potential EPS of $6.00.”


Reply: Inktomi has what appears to be a strong position today as a
recognized leader in traffic caching. The market for caching may exceed $7
billion in 2002 by our estimations. While we believe competition to be
fierce, leaders may be able to leap tall buildings in a single bound.
Market share? Perhaps 25%. Or Inktomi is acquired from now until then.


The
server side and router brigade may try and get a bigger piece of caching as
time goes on. Regarding shares outstanding, 20 million may be low if this
splits numerous times, which in the span of four years we’d expect if INKT
stays hot.

Blue Light Special


“I bought ONSL at $30 on May 21, but now it sits at about $22.50
per share. The financials appear to be very healthy. What is your opinion
on this stock?”

Reply: In our view ONSALE (NASDAQ:ONSL) represents a better model
for Internet commerce than pure retail. Its challenge, however, may be to
broaden the sales lineup and shorten the bidding process. Another challenge
is building brand to leverage into new auction-driven or sales areas as
more and more auction services go public (eBay, uBID).

Cyberian Tiger?


“What do you think of Cyberian Outpost? Could it be the next hot issue?”

Reply: Egghead’s run could help Cyberian (cl
ick here
to see Cyberian pre-IPO analysis)
. But Digital River, a company that sells software via the Internet via downloads, is also screaming down the IPO pipeline. Downloads equals no CD jewel box, no plastic wrap, and better
margins. In the Internet era those that have “digital” products and
fulfillment (no real-world based packaging or distribution) are poised to
fare better in the long term.

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